Global fleets missing out on cost-saving benefits of centralised buying for all vehicles

By / 11 years ago / News / No Comments

That’s the view of Tobias Kern, senior consultant at Brussels-based global fleet consultancy, FleetVision, which has just completed the management of a global truck tender on behalf of a multi-national client which operates cars, light commercial and heavy trucks in a number of different regions.

Mr Kern said: ‘In the recent global truck tender that we were involved in, we were able to identify opportunities for improvement and optimization all along the value chain, from funding to operating costs. Whilst the final truck specifications had been defined by the local stakeholder, our focus was on aligning those specifications with best-in-class costs of ownership.

‘Clearly, sourcing levers for cars and trucks differ significantly, which results in a different level of complexity for trucks compared to car sourcing. However, once aware of the key aspects, these should not prevent an integrated central sourcing approach for cars and trucks,’ he added.

Mr Kern conceded that there are a number of obstacles to overcome before the successful implementation of trucks into a centralised buying approach.

‘One reason for this can be found on the fleet operator side. International fleet procurement specialists are hesitant in stepping onto what they consider to be uncertain ground or new territory. Trucks are normally considered as being too specific and complex and thus remain a subject for local sourcing,’ he said.

‘At the same time, vehicle suppliers typically operate separate business units with individual sales structures that do not encourage a centralised buying approach for all vehicles, which creates an extra level of complexity for procurement executives.

‘At FleetVision we remain convinced that companies running a de-centralised approach to sourcing and managing truck fleets miss scale effects in procurement and spend too much on operational costs during the lifecycle of a vehicle.

Mr Kern acknowledged that there are some fundamental differences between car and truck markets. Whilst lease contracts for cars are typically of between three and four years, funding terms for trucks can often be up to 10 years, depending on the overall mileage or number of operating hours for the individual truck fleet.

‘Consequently, the investment in a special truck brand or model requires careful thought due to the extended holding period of the asset,’ he said.

This longer holding period means that maintenance and repair costs are a greater part of the operational lifecycle costs of a truck. Depending on the intensity of usage, closed-end service contracts are typically available for up to seven years, while extended warranties are subject of negotiation during the sourcing process.

‘In the car market, operating lease models typically link funding and service components, but in the truck sector some OEM service networks even offer stand alone, closed-end contracts for a multi-brand truck fleet,’ he said.

While the “whole-life cost” approach is common in both car and truck market segments, fleet truck operators face a higher level of complexity since operating hours, as well as mileages, play an important role in measuring and defining the TCO of a vehicle.

‘Market structures for trucks might not be perceived as mature as those for passenger vehicles. But if fleet procurement specialists include trucks within their central purchasing programmes, and OEMs increase their incentives and improve the flexibility necessary for a centralised sourcing approach, then both sides of the buying equation – demand and supply – can benefit,’ said Tobias Kern.

For fleet operators interested in gaining some further insight into the benefits of a centralised buying approach, FleetVision has published a summary: ‘Comparing Car versus Truck Sourcing’ on its website at www.fleetvision.biz.

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Natalie Middleton

Natalie has worked as a fleet journalist for nearly 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. Natalie edits all the Fleet World websites and newsletters, and loves to hear about any latest industry news - or gossip.

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